Labour Tax and Child Benefits Reform in Lithuania: For Better or Worse?

Aurelija Anciūtė, Viginta Ivaškaitė-Tamošiūnė, Anamaria Maftei and Janos Varga

No 59, European Economy - Economic Briefs from Directorate General Economic and Financial Affairs (DG ECFIN), European Commission

Abstract: In 2019, Lithuania overhauled the country’s labour taxation. Social insurance contributions paid by employers and employees were consolidated, and were accompanied by adjustments in gross wages and personal income tax rates, and increases in the minimum gross wage and the tax-free allowance. Simultaneously, the government increased the universal child benefit. Simulations based on the EUROMOD and QUEST models are used to assess the fiscal, redistributive, equity and macroeconomic impact of these reforms. Overall, the set of simulated changes marginally decreases the tax wedge, poverty and income inequality. The labour taxation reform is estimated to be costly, with a small stimulating effect on the economy.

Keywords: Lithuania; labour taxation; child benefits; social insurance contributions; minimum wage; tax wedge; disposable income; income inequality; poverty; growth; Anciūtė; Ivaškaitė-Tamošiūnė; Maftei; Varga. (search for similar items in EconPapers)
JEL-codes: D04 D31 D63 E62 H23 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2020-09
New Economics Papers: this item is included in nep-cis, nep-ias, nep-mac, nep-pbe and nep-pub
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Persistent link: https://EconPapers.repec.org/RePEc:euf:ecobri:059

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